Banking

MasterCard posts second-quarter profit

Payment company joins rival Visa in beating Wall Street estimates

By

SamMamudi

NEW YORK (MarketWatch) -- Shares of MasterCard Inc. rose 3% Thursday as it became the second payments company in less than 24 hours to beat analysts' expectations, posting a second-quarter profit on the back of rising revenues and lower costs.

The firm
MA, -1.73%
reported a profit of $349 million, or $2.67 a share, compared to a loss of $747 million, or $5.70 a share, in the year-ago period. Net revenues rose to $1.28 billion, from $1.25 billion. Analysts surveyed by FactSet Research had expected, on average, profit of $2.42 a share on sales of $1.25 billion.

"We are very pleased with our second-quarter financial performance and are adapting well to the challenging economic environment," said Robert Selander, president and chief executive officer. "The thoughtful actions we've taken to realign our resources and priorities to match customer and local market needs, as well as our sharp focus on expense management, have enabled us to deliver strong operating margin and net income improvements."

On a constant-currency basis, MasterCard said net revenue rose 7% over the second quarter of 2008, fueled by price changes, a 7.9% increase in transactions, to 5.6 billion, and 5.8% decline in rebates and incentives.

At quarter's end, MasterCard's financial-institution customers had issued 959 million MasterCard cards, a 1.2% rise from the same period last year.

Excluding special items, total operating expenses fell 13%, to $722 million, compared to the second-quarter of 2008. While currency fluctuations accounted for 3.2 percentage points of the decline, other factors included a 2.9% decrease in general and administrative expenses -- excluding severance costs, general and administrative expenses fell 10.7% -- and a 35.8% drop in advertising and marketing expenses.

Including special items, total operating expenses fell 70.9%, to $723 million, mainly due to its antitrust settlement with American Express Co.
AXP, +0.32%
that took place in the second quarter of 2008.

MasterCard said its operating margin was 43.6% in the latest quarter, an improvement from the 33.4% figure in the year-ago period.

MasterCard shares rose 3% to close at $194.11 on Thursday.

MasterCard's results follow those of Visa Inc.
V, -1.29%
which reported after Wednesday's close a 73% jump in its second-quarter profit. Excluding one-time gains -- including its international arm's initial public offering -- Visa's adjusted quarterly net income was $507 million, or 67 cents a share, ahead of consensus estimates of 64 cents a share. See full story.

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